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No. of Recommendations: 3
By the way, I consider "low PE" to be less than about 10-15, not 15-23. Historically over the past 20-30 years stocks have been averaging about 20-25 for PE's (depending on who crunches the numbers).

I still don't understand where you get this number. Could you provide a reference? One major issue is that the last 20-30 years include a very large bull market that persistently showed very high P/E ratios that will skew this number upwards. I think you have to take a much longer historical view to include at least the bear market preceding it to get a useful average.

The long term P/E averages I've seen are generally calculated to be around 14. There are many sources for this. In this article, see the first chart, from Vitaliy Katsenelson, who is pretty good at getting his facts right: http://www.frontlinethoughts.com/printarticle.asp?id=mwo0808... (you may need to type in your email but can use a fake one if you want). He gets 15.2.

Low P/E, historically, is around 8-10 for an entire average like S&P 500. In 1982 the S&P 500's P/E was 7.3. For an excellent source on this, see Crestmont Research's outstanding Stock Market Matrix (http://www.crestmontresearch.com/content/Matrix%20Options.ht... ). Crestmont gets a long-term P/E average of around 14.

That's a big difference vs. 20-25. And especially it implies that P/Es in the low teens range (13, 14, ...) are *average*, not low. Caveat emptor.

-Mike
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